# TruBridge, Inc. (TBRG) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from TruBridge, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1169445/000116944525000042/tbrg-20241231.htm
Accession: 0001169445-25-000042
Filing date: 2025-03-17
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/TBRG/
All MD&A years: /company/TBRG/mda/
Previous year: /company/TBRG/mda/fy2023/ (FY 2023)
Next year: /company/TBRG/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the "Selected Financial Data" and our financial statements and the related notes included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under "Risk Factors" and elsewhere in this Annual Report.

Background

During much of the Company's history, our strategy, operations, and financial results have been largely associated with developments in the electronic health record ("EHR") industry. With the rapid maturity of the EHR industry and the increasing prevalence of and demand for outsourced revenue cycle management ("RCM") services and complementary solutions, we've seen our strategy, operations, and financial results naturally evolve to become more heavily associated with RCM, with RCM-related revenues comprising 64% of our consolidated revenue for 2024. In recognition of this significant shift in strategic focus, Computer Programs and Systems, Inc. changed its corporate name to TruBridge, Inc. on March 4, 2024. Contemporaneous with this name change, the former wholly-owned subsidiaries Evident, LLC, TruBridge, LLC, and TruCode, LLC were merged into the parent company, while the former wholly-owned subsidiary Rycan Technologies, Inc. was merged into its parent and another wholly-owned subsidiary, Healthland Holding Inc. With these changes, the Company's remaining legal structure includes TruBridge, Inc., the parent company, with Viewgol, LLC ("Viewgol"), TruBridge Healthcare Private Limited, iNetXperts, Corp. d/b/a Get Real Health, Healthcare Resource Group, Inc. ("HRG"), Healthland Holding Inc. and Healthland, Inc. as its wholly-owned direct and indirect subsidiaries.

Founded in 1979, TruBridge is a leading provider of healthcare services and solutions for community hospitals, their clinics and other healthcare systems. Our combined companies are focused on helping improve the health of the communities we serve, connecting communities for a better patient care experience, and improving the financial operations of our customers.

The Company operates its business in two operating segments, which are also our reportable segments: Financial Health and Patient Care. These reporting segments contribute towards the combined focus of improving the health of the communities we serve as follows:

•The Financial Health reporting segment focuses on providing business management, consulting, and managed IT services along with a complete RCM solution for all care settings, regardless of their primary healthcare information solutions provider.

•The Patient Care segment provides comprehensive acute care EHR solutions and related services for community hospitals and their physician clinics. The Patient Care segment also offers comprehensive patient engagement and empowerment technology solutions to improve patient outcomes and engagement strategies with care providers.

Our companies currently support community hospitals and other healthcare systems with a geographically diverse patient mix within the domestic community healthcare market. Our target market for our Financial Health and Patient Care solutions includes community hospitals with fewer than 400 acute care beds and their clinics, as well as independent or small to medium sized chains of skilled nursing facilities. 97% of our Patient Care hospital customer base is comprised of hospitals with fewer than 100 beds.

See Note 18 to the consolidated financial statements included herein for additional information on our two reportable segments.

Management Overview

Strategy

Our core strategy is to achieve meaningful long-term revenue growth by cross-selling Financial Health services into our existing Patient Care customer base, expanding Financial Health market share with sales to new community hospitals and larger health systems, and pursuing competitive Patient Care takeaway opportunities. We may also seek to grow through acquisitions of businesses, technologies or products if we determine that such acquisitions are likely to help us meet our strategic goals.

46

Our growth strategy is heavily dependent on our ability to cross-sell Financial Health services to our Patient Care customer base. As such, retention of our existing Patient Care customers is a key component of our long-term growth strategy by protecting this base of potential Financial Health customers, while at the same time serving as a leading indicator of our market position and stability of revenues and cash flows.

We determine retention rates by reference to the amount of beginning-of-period Patient Care recurring revenues that have not been lost due to customer attrition from our production environment customer base. Production environment customers are those that are using our applications to document live patient encounters, as opposed to legacy environment customers that have view-only access to historical patient records. Since 2019, these retention rates have consistently remained in the mid-to-high 90th percentile ranges. Specifically, we achieved retention rates between 92.1% and 98.2% in 2021 through 2024, as EHR product consolidation has led to an increase in attrition from our non-flagship products during recent years (retention for our flagship EHR product was approximately 97.3% in 2024). We have increased customer retention efforts by enhancing support services, investing in tooling and instrumentation to proactively monitor for potential disruptions, and deploying in-application experience software that delivers application-specific insights while using our products.

As we pursue meaningful long-term revenue growth by leveraging Financial Health as a growth agent, we are placing ever-increasing value in further developing our already significant recurring revenue base to further stabilize our revenues and cash flows. As such, maintaining and growing recurring revenues are key components of our long-term growth strategy, aided by the aforementioned focus on customer retention. This includes a renewed focus on driving demand for subscriptions for our existing technology solutions and expanding the footprint for Financial Health services beyond our Patient Care customer base.

While the combination of revenue growth and operating leverage is expected to result in increased margin realization, we also look to increase margins through specific cost containment measures where appropriate as we continue to leverage opportunities for greater operating efficiencies.

Industry Dynamics

Turbulence in the U.S. and worldwide economies and financial markets impacts almost all industries. While the healthcare industry is not immune to economic cycles, we believe it is more significantly affected by U.S. regulatory and national health initiatives. In recent years, there have been significant changes to provider reimbursement by the U.S. federal government, followed by commercial payers and state governments. There is increasing pressure on healthcare organizations to reduce costs and increase quality while replacing the fee-for-service reimbursement model in part by enrolling in an advanced payment model that incentivizes high-quality, cost effective-care via value-based reimbursement. This pressure could further encourage adoption of healthcare IT and increase demand for business management, consulting, and managed IT services, as the future success of these healthcare providers is greatly dependent upon their ability to engage patient populations and to coordinate patient care across a multitude of settings, while optimizing operating efficiency along the way.

Additionally, healthcare organizations with a large dependency on Medicare and Medicaid populations, such as community hospitals, have been affected by the challenging financial condition of the federal government and many state governments and government programs. Accordingly, we recognize that prospective hospital clients often do not have the necessary capital to make investments in information technology while those with the necessary capital have become more selective in their investments. Despite these challenges, we believe healthcare IT will be an area of continued investment due to its unique potential to improve safety and efficiency and reduce costs while meeting current and future regulatory, compliance and government reimbursement requirements.

Patient Care License Model Preferences

Much of the variability in our periodic revenues and profitability has been and will continue to be due to changing demand for different license models for our technology solutions, with variability in operating cash flows further impacted by the financing decisions within those license models. Our technology solutions are generally deployed in one of two license models: (1) perpetual licenses, for which the related revenue is recognized effectively upon installation, and (2) “Software as a Service” or “SaaS” arrangements, including our Cloud Electronic Health Record (“Cloud EHR”) offering, which generally result in revenue being recognized monthly as the services are provided over the term of the arrangement.

The overwhelming majority of our historical Patient Care installations have been under a perpetual license model, but customer demand has dramatically shifted towards a SaaS license model in the past several years. SaaS license models made up only 12% of annual new acute care Patient Care installations in 2018, increasing to 100% during 2022 through 2024. These SaaS offerings are attractive to our clients because this configuration allows them to obtain access to advanced software products without a significant initial capital outlay. We expect this trend to continue for the foreseeable future, with the resulting impact on the Company’s financial statements being reduced Patient Care revenues in the period of installation in exchange for

47

increased recurring periodic revenues (reflected in Patient Care revenues) over the term of the SaaS arrangement. This naturally places downward pressure on short-term revenue growth and profitability metrics, but benefits long-term revenue growth and profitability which, in our view, is consistent with our goal of delivering long-term shareholder value.

For customers electing to purchase our technology solutions under a traditional perpetual license, we have historically made financing arrangements available on a case-by-case basis, depending on the various aspects of the proposed contract and customer attributes. These financing arrangements have comprised the majority of our perpetual license installations over the past several years, and include short-term payment plans and longer-term lease financing through us or third-party financing companies. The aforementioned shift in customer preference towards SaaS arrangements has significantly reduced the frequency of new financing arrangements for customer purchases under a perpetual license. When combined with scheduled payments on existing financing arrangements, the reduced frequency of new financing arrangements has resulted in a substantial reduction in financing receivables during 2024.

For those perpetual license clients not seeking a financing arrangement, the payment schedule of the typical contract is structured to provide for a scheduling deposit due at contract signing, with the remainder of the contracted fees due at various stages of the installation process (delivery of hardware, installation of software and commencement of training, and satisfactory completion of a monthly accounting cycle or end-of-month operation by each respective application, as applicable).

Margin Optimization Efforts

Our core growth strategy includes margin optimization by identifying opportunities to further improve our cost structure by executing against initiatives related to organizational realignment, expanded use of offshore resources and the use of automation to increase the efficiency and value of our associates' efforts. Specifically, since 2021, we have implemented a reduction in force intended to more effectively align our resources with business priorities and the Scaled Agile Framework® throughout our EHR product development, implementation and support functions to enhance cohesion, time-to-market and customer satisfaction. This framework is a set of organization and workflow patterns intended to guide enterprises in scaling lean and agile practices and promote alignment, collaboration, and delivery across large numbers of agile teams.

Additionally, margin optimization initiatives of expanded utilization of offshore resources and automation have commenced and, to date, have provided meaningful efficiencies to our operations, particularly within the Financial Health business. As a service organization, Financial Health's cost structure is heavily dependent upon human capital, subjecting it to the complexities and risks associated with this resource. Chief among these complexities and risks is the ever-present pressure of wage inflation, which has compelled the Company to make compensation adjustments that are outside of historical norms. Prior to our October 2023 acquisition of Viewgol, we were solely reliant upon third-party partnerships for offshore resources, increasing both the execution risk of this initiative and the related cost of scaling this labor force. With Viewgol as a subsidiary, we have greatly enhanced our control over the resource availability for this initiative and we expect to achieve meaningful per-unit cost efficiencies.

We believe that our efforts towards margin optimization are well-timed, enabling a rapid response to actual or expected wage inflation in order to preserve Financial Health profitability, but we cannot guarantee that these efforts will fully eliminate any related margin deterioration.

In addition to wage inflation, we are a party to contracts with certain third-party suppliers and vendors that allow for annual price adjustments indexed to inflation. While we continually seek to proactively manage controllable expenses, inflationary pressure on costs has led to, and could lead to, erosion of margins.

48

2024 Financial Overview

In the fourth quarter of 2022, the Company started to make changes to its organizational structure and management system to better align the Company's operating model with its strategic initiatives. With these changes, the Company realigned its reportable segments from three reportable segments of (i) RCM, (ii) EHR, and (iii) Patient Engagement to two reportable segments of (i) RCM and (ii) EHR. The Patient Engagement segment results have been transitioned into the EHR segment. During the Company’s realignment, the reportable segments naming convention was updated. The previously reported RCM segment has been updated to Financial Health and the former EHR segment has been updated to Patient Care. Throughout this discussion, prior-year results have been recast to conform with the change in reportable segments noted above.

We generated revenues of $342.6 million from the sale of our products and services during 2024, compared to $336.0 million during 2023. The increase was primarily due to organic growth in the Financial Health segment and inorganic growth from the acquisition of Viewgol, partially offset by the sale of American HealthTech, Inc (AHT), the Company’s post-acute care EHR business. Net income (loss) increased by $28.0 million to a net loss of $20.4 million during 2024, compared to a net loss of $48.4 million during 2023. This was driven by an increase in operating income of $52.7 million primarily due to the impairment charges of $35.9 million and $2.3 million recognized on goodwill and a trademark asset, respectively, during 2023, along with a reduction in costs of revenue in 2024. Corresponding to this increased profitability, net cash provided by operating activities increased by $31.1 million, from $1.1 million provided by operations during 2023 to $32.1 million provided by operations during 2024.

Results of Operations

The following table sets forth certain items included in our results of operations for each of the three years in the period ended December 31, 2024, expressed as a percentage of our total revenues for these periods:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2024","","2023","","2022"],["(In thousands)","Amount","","% Sales","","Amount","","% Sales","","Amount","","% Sales"],["INCOME DATA:"],["Revenues:"],["Financial Health","$","217,672","","","63.5","%","","$","192,325","","","57.2","%","","$","179,870","","","55.1","%"],["Patient Care","124,974","","","36.5","%","","143,630","","","42.8","%","","146,778","","","44.9","%"],["Total revenues","342,646","","","100.0","%","","335,955","","","100.0","%","","326,648","","","100.0","%"],["Expenses"],["Costs of revenue (exclusive of amortization and depreciation)"],["Financial Health","116,891","","","34.1","%","","110,192","","","32.8","%","","97,024","","","29.7","%"],["Patient Care","51,640","","","15.1","%","","65,676","","","19.5","%","","69,517","","","21.3","%"],["Total costs of revenue (exclusive of amortization and depreciation)","168,531","","","49.2","%","","175,868","","","52.3","%","","166,541","","","51.0","%"],["Product development","34,456","","","10.1","%","","37,246","","","11.1","%","","31,898","","","9.8","%"],["Sales and marketing","27,059","","","7.9","%","","28,049","","","8.3","%","","27,131","","","8.3","%"],["General and administrative","76,992","","","22.5","%","","76,153","","","22.7","%","","54,965","","","16.8","%"],["Amortization","27,627","","","8.1","%","","24,522","","","7.3","%","","20,887","","","6.4","%"],["Depreciation","1,346","","","0.4","%","","1,946","","","0.6","%","","2,443","","","0.7","%"],["Goodwill impairment","\u2014","","","\u2014","%","","35,913","","","10.7","%","","\u2014","","","\u2014","%"],["Trademark impairment","\u2014","","","\u2014","%","","2,342","","","0.7","%","","\u2014","","","\u2014","%"],["Total expenses","336,011","","","98.1","%","","382,039","","","113.7","%","","303,865","","","93.0","%"],["Operating income (loss)","6,635","","","1.9","%","","(46,084)","","","(13.7)","%","","22,783","","","7.0","%"],["Other income (expense):"],["Other income (expense)","(670)","","","(0.2)","%","","745","","","0.2","%","","1,618","","","0.5","%"],["Interest expense","(16,169)","","","(4.7)","%","","(12,521)","","","(3.7)","%","","(6,320)","","","(1.9)","%"],["Total other income (expense)","(16,839)","","","(4.9)","%","","(11,776)","","","(3.5)","%","","(4,702)","","","(1.4)","%"],["Income (loss) before taxes","(10,204)","","","(3.0)","%","","(57,860)","","","(17.2)","%","","18,081","","","5.5","%"],["Provision (benefit) for income taxes","10,235","","","3.0","%","","(9,426)","","","(2.8)","%","","2,214","","","0.7","%"],["Net income (loss)","$","(20,439)","","","(6.0)","%","","$","(48,434)","","","(14.4)","%","","$","15,867","","","4.9","%"]]
[[/GREPCENT_TABLE]]

49

2024 Compared to 2023

Revenues

Total revenues for the year ended December 31, 2024 increased by $6.7 million, or 2.0%, compared to the year ended December 31, 2023.

Financial Health revenues increased by $25.3 million, or 13%, compared to 2023, primarily due to the acquisition of Viewgol, which increased Financial Health revenue by $16.3 million. Revenues excluding Viewgol increased by $9.0 million, driven by new contracts.

Patient Care revenues decreased by $18.7 million, or 13%, from the year ended December 31, 2023, primarily due to the sale of AHT and the sunset of our Centriq platform, and were comprised of the following for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["(In thousands)","2024","","2023"],["Recurring Patient Care revenues (1)"],["Acute Care","$","110,794","","","$","115,184"],["Post-acute Care","597","","","14,712"],["Total recurring Patient Care revenues","111,391","","","129,896"],["Non-recurring Patient Care revenues (2)"],["Acute Care","13,513","","","12,316"],["Post-acute Care","70","","","1,418"],["Total non-recurring Patient Care revenues","13,583","","","13,734"],["Total Patient Care revenue","$","124,974","","","$","143,630"],["(1) Mostly comprised of support and maintenance, third-party subscriptions, and SaaS revenues."],["(2) Mostly comprised of installation revenues from the sale of our acute and post-acute care Patient Care solutions and related applications under a perpetual (non-subscription) licensing model."]]
[[/GREPCENT_TABLE]]

Recurring Patient Care revenues decreased by $18.5 million, or 14%, compared to 2023. The decrease was driven by the sale of AHT in January 2024, which caused a decrease in post-acute care recurring revenues of $14.1 million. Acute care recurring revenues decreased by $4.4 million driven by a decline in support revenues due to customer migration to SaaS arrangements and the sunset of our Centriq platform.

Non-recurring Patient Care revenues decreased by $0.2 million, or 1%, compared to 2023. This decrease was primarily due to the sale of AHT in January 2024.

Patient Care revenues for 2024 included $0.7 million in revenues from AHT, which the Company sold in January 2024. See Note 3 to the consolidated financial statements included herein for more information.

Costs of Revenue (exclusive of amortization and depreciation)

Total costs of revenue (exclusive of amortization and depreciation) decreased by $7.3 million compared to 2023. As a percentage of total revenues, costs of revenue (exclusive of amortization and depreciation) decreased slightly to 49% during 2024 compared to 52% during 2023.

Costs associated with our Financial Health revenues increased by $6.7 million, or 6%, compared to 2023, driven by increased costs of revenue from Viewgol of $5.3 million. Costs associated with revenues excluding Viewgol increased by $1.4 million, primarily from incremental offshore costs to support organic revenue growth.

Costs associated with our Patient Care revenues decreased by $14.0 million, or 21%, compared to 2023, primarily due to (i) the sale of AHT in January 2024, which decreased payroll and software costs, (ii) our vendor savings initiative, which led to software expense reductions, and (iii) headcount reduction as a result of our voluntary early retirement program in 2023 and labor force optimization in 2024.

50

Product Development

Product development expenses consist primarily of compensation and other employee-related costs (including stock-based compensation) and infrastructure costs incurred, but not capitalized, for new product development and product enhancements. Product development costs decreased by $2.8 million, or 7%, compared to 2023, primarily due to labor cost optimization.

Sales and Marketing

Sales and marketing costs decreased by $1.0 million, or 4%, compared to 2023 driven by reduced payroll and marketing program costs.

General and Administrative

General and administrative expenses increased by $0.8 million, or 1%, compared to 2023. The increase was mainly driven by an increase in stock compensation of $2.1 million and incremental expenses resulting from the acquisition of Viewgol of $4.9 million. This was partially offset by a decrease in non-recurring severance costs of $4.8 million and a decrease in reorganization costs of $1.9 million.

Amortization & Depreciation

Combined amortization and depreciation expense increased by $2.5 million, or 9%, as increasing capitalized software development asset balances resulted in an increase in the related amortization.

Trademark & Goodwill Impairment

During 2024, the Company had no trademark or goodwill impairment compared to the combined impairment charges related to trademark intangibles and goodwill of $38.3 million in 2023.

Total Other Income (Expense)

Total other income (expense) increased to expense of $16.8 million during 2024 compared to expense of $11.8 million during 2023. Higher interest rates and a higher debt level resulted in a $3.6 million increase in interest expense.

Income (Loss) Before Taxes

As a result of the foregoing factors, income (loss) before taxes improved to a loss of $10.2 million in 2024, compared to a loss of $57.9 million in 2023.

Provision (Benefit) for Income Taxes

Our effective income tax rates for 2024 and 2023 were (100)% and 16%, respectively. Our effective tax rate for 2024 was significantly impacted by a $12.7 million federal and state valuation allowance recorded on deferred tax assets as of December 31, 2024. This valuation allowance primarily relates to capitalized research and expenditures and capital loss carryforwards that are not more likely than not to be realized.

Net Income (Loss)

Net Income (loss) for 2024 improved by $28.0 million to a loss of $20.4 million, or a loss of $1.38 per basic and diluted share, compared to a loss of $48.4 million, or $3.34 per basic and diluted share, for 2023.

Supplemental Segment Information

Our reportable segments have been determined in accordance with ASC 280 - Segment Reporting. We have two reportable operating segments: Financial Health and Patient Care. We evaluate each of our two operating segments based on segment revenues and segment adjusted EBITDA.

Adjusted EBITDA consists of GAAP net income (loss) as reported and adjusts for (i) deferred revenue purchase accounting adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) depreciation expense; (iii) amortization of software development costs; (iv) amortization of acquisition-related intangible assets; (v) stock-based compensation; (vi) severance and other non-recurring charges; (vii) interest expense and other, net; (viii) impairment of goodwill; (ix) impairment of trademark intangibles; (x) (gain) loss on contingent consideration; and (xi) the provision (benefit) for income taxes. The segment measurements provided to and evaluated by the chief operating decision makers ("CODM") are

51

described in Note 18 to the condensed consolidated financial statements. These results should be considered in addition to, and not as a substitute for, results reported in accordance with GAAP.

The following table presents a summary of the revenues and adjusted EBITDA of our two operating segments for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Change"],["","2024","","2023","","$","","%"],["(In thousands)"],["Revenues by segment:"],["Financial Health","$","217,672","","","$","192,325","","","$","25,347","","","13","%"],["Patient Care","124,974","","","143,630","","","(18,656)","","","(13)","%"],["Adjusted EBITDA by segment:"],["Financial Health","$","36,163","","","$","23,196","","","$","12,967","","","56","%"],["Patient Care","20,407","","","20,900","","","(493)","","","(2)","%"]]
[[/GREPCENT_TABLE]]

Segment Revenues

Refer to the corresponding discussion of revenues for each of our reportable segments previously provided under the Revenues heading of this Management's Discussion and Analysis. There are no intersegment revenues to be eliminated in computing segment revenue.

Segment Adjusted EBITDA - Year Ended December 31, 2024 Compared with Year Ended December 31, 2023

Financial Health adjusted EBITDA increased by $13.0 million, or 56%, compared to 2023. While revenues have increased by $25.3 million, or 13%, this growth has been partially offset by an increase in costs of revenue (exclusive of amortization and depreciation) of $6.7 million, or 6%. The adjusted EBITDA increase was due to the Viewgol acquisition as well as incremental revenue from new contracts.

Patient Care adjusted EBITDA decreased by $0.5 million, or 2%, compared to 2023. Revenues decreased by $18.7 million, or 13%, driven by the sale of AHT in January 2024 and a decline in support revenues due to customer migration to SaaS arrangements and the sunset of our Centriq platform. This was partially offset by a decrease in cost of revenues of $14.0 million due to lower payroll and software costs as a result of our vendor savings initiative, the voluntary early retirement program, and labor force optimization.

2023 Compared to 2022

For a discussion and analysis of changes in financial condition and results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 15, 2024.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $12.3 million and our remaining borrowing capacity under the revolving credit facility of $43.6 million, compared to $3.8 million of cash and cash equivalents and $24.3 million of remaining borrowing capacity under the revolving credit facility as of December 31, 2023. In January 2016, we entered into a syndicated credit agreement which provided for a $125 million term loan facility and a $50 million revolving credit facility. On June 16, 2020, we entered into an Amended and Restated Credit Agreement that increased the aggregate principal amount of our credit facilities to $185 million, which included a $75 million term loan facility and a $110 million revolving credit facility. On May 2, 2022, we entered into a First Amendment to the Amended Restated Credit Agreement that further increased the aggregate principal amount of our credit facilities to $230 million, which included a $70 million term loan facility and a $160 million revolving credit facility.

52

As of December 31, 2024, we had $172.8 million in principal amount of indebtedness outstanding under the credit facilities. We believe that our cash and cash equivalents of $12.3 million as of December 31, 2024, our future operating cash flows, and our remaining borrowing capacity under the revolving credit facility of $43.6 million as of December 31, 2024, taken together, provide adequate resources to fund ongoing cash requirements for the next twelve months and beyond. We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of filing of this Annual Report on Form 10-K. If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we may be required to obtain additional sources of funds through additional operational improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms. Aside from normal operating cash requirements, obligations under our Credit Agreement (as discussed below) and operating leases, and opportunistic uses of capital in share repurchases and business acquisition transactions, we do not have any material cash commitments or planned cash commitments. Although the Company currently has no obligations related to planned acquisitions, the Company's strategy includes the potential for future acquisitions, which may be funded through draws on the credit facilities or the use of the other sources of liquidity described above.

Operating Cash Flow Activities

Net cash provided by operating activities increased by $31.1 million from $1.1 million for 2023 to $32.1 million for 2024, as the Company’s net income (loss) increased by $28.0 million. The increase in cash flows provided by operations was partially driven by the increased collections from improved working capital management and the timing of income tax payments.

Investing Cash Flow Activities

Net cash provided by (used in) investing activities increased by $64.2 million, to cash provided by investing activities of $4.1 million during 2024, compared to cash used in investing activities of $60.1 million during 2023. This increase in cash provided by investing activities was due to the completion of our sale of AHT in January 2024 for proceeds of $21.4 million, a decrease in investments in software development, and the sale of property during the second half of 2024.

Financing Cash Flow Activities

During 2024, our financing activities were a net use of cash in the amount of $27.7 million, as long-term debt principal payments of $56.3 million and $0.4 million used to repurchase shares of our common stock were partially offset by $29.5 million in borrowings from our revolving line of credit. During 2023, our financing activities were a net source of cash provided in the amount of $55.9 million, as $67.0 million in borrowings from our revolving line of credit were partially offset by long-term debt principal payments of $8.5 million and $2.6 million used to repurchase shares of our common stock.

Stock Repurchases

On September 4, 2020, our Board of Directors approved a stock repurchase program to repurchase up to $30.0 million in aggregate amount of the Company's outstanding shares of common stock through open market purchases, privately-negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. On July 27, 2022, our Board of Directors extended the expiration of the stock repurchase program to September 4, 2024. The share repurchase program expired according to its terms on September 4, 2024. These shares could be purchased from time to time throughout the duration of the stock repurchase program depending upon market conditions. Our ability to repurchase any shares in future periods is subject to approval of a new repurchase program by our Board of Directors and compliance with the terms of our Amended and Restated Credit Agreement. Concurrent with the authorization of this stock repurchase program in September 2020, the Board of Directors opted to indefinitely suspend all quarterly dividends.

Common Stock Rights Agreement

On March 26, 2024, the Board of Directors declared a dividend of one right (a “Right”) for each of the Company’s issued and outstanding shares of common stock. The dividend was paid to the stockholders of record at the close of business on April 4, 2024. The complete description and terms of the Rights were set forth in the Rights Agreement, dated as of March 26, 2024, by and between the Company and ComputerShare Trust Company, N.A. as rights agent, as amended by the Amendment to the Rights Agreement dated as of April 22, 2024 (as amended, the “Rights Agreement”). On February 11, 2025, the Company and Computershare Trust Company, N.A. entered into the Second Amendment to the Rights Agreement. The amendment terminated the Rights Agreement by accelerating the expiration time of the Rights Agreement to expire on February 12, 2025. At the time of the termination of the Rights Agreement, all of the Rights, which were previously distributed to holders of the Company’s issued and outstanding common stock, par value $0.001, pursuant to the Rights Agreement, expired.

53

Each Right initially entitled the registered holder, subject to the terms of the Rights Agreement, to purchase from the Company one half of a share of common stock, at an exercise price of $28.00 for each one half of a share of common stock (equivalent to $56.00 for each whole share of common stock), subject to certain adjustments. The Rights would only become exercisable upon the occurrence of certain events as described in the Rights Agreement.

The Company analyzed the terms governing the Rights under ASC 480, Distinguishing Liabilities from Equity, and concluded that the Rights were a freestanding financial instrument that qualified for liability classification. Specifically, the provisions within the Rights Agreement provided for scenarios outside of the Company’s control that could require the Company to settle a portion of the Rights in cash, rather than in shares of common stock.

The Rights were only exercisable upon the occurrence of certain events, which had not occurred as of the end of the reporting period. As it was not considered likely that these events would occur, the Company considered the likelihood of exercise to be remote and had not ascribed value to the Rights as of December 31, 2024.

Credit Agreement

As of December 31, 2024, we had $56.4 million in principal amount outstanding under the term loan facility and $116.4 million in principal amount outstanding under the revolving credit facility. Each of our credit facilities continues to bear interest at a rate per annum equal to an applicable margin plus, at our option, either (1) the Adjusted SOFR rate for the relevant interest period, subject to a floor of 0.50%, (2) an alternate base rate determined by reference to the greater of (a) the prime lending rate of Regions, (b) the federal funds rate for the relevant interest period plus one half of one percent per annum and (c) the one month SOFR rate, subject to the aforementioned floor, plus one percent per annum, or (3) a combination of (1) and (2). The applicable margin for SOFR loans and the letter of credit fee ranges from 1.8% to 3.0%. The applicable margin for base rate loans ranges from 0.8% to 2.0%, in each case based on the Company's consolidated net leverage ratio.

Principal payments with respect to the term loan facility are due on the last day of each fiscal quarter beginning June 30, 2022, with quarterly principal payments of approximately $0.9 million through March 31, 2027, with maturity on May 2, 2027 or such earlier date as the obligations under the Amended and Restated Credit Agreement, become due and payable pursuant to the terms of such agreement. Any principal outstanding under the revolving credit facility is due and payable on the maturity date.

Our credit facilities are secured pursuant to the Amended and Restated Credit Agreement, dated as of June 16, 2020, among the parties identified as obligors therein and Regions, as collateral agent, on a first priority basis by a security interest in substantially all of the tangible and intangible assets (subject to certain exceptions) of the Company and certain subsidiaries of the Company, as guarantors (collectively, the “Subsidiary Guarantors”), including certain registered intellectual property and the capital stock of certain of the Company’s direct and indirect subsidiaries. Our obligations under the Amended and Restated Credit Agreement are also guaranteed by the Subsidiary Guarantors. Refer to Note 13 of the consolidated financial statements included herein for additional detail regarding our credit facilities.

Bookings

Bookings is a key operational metric used by management to assess the relative success of our sales generation efforts, and were as follows for the years ended December 31, 2024 and 2023, respectively:

[[GREPCENT_TABLE]]
[["(In thousands)","2024","2023"],["Financial Health(1)","$","48,860","","$","48,986"],["Patient Care(2)","33,214","","31,253"],["Total Bookings","$","82,074","","$","80,239"],["(1) Generally calculated as the annual contract value"],["(2) Generally calculated as the total contract value for system sales and SaaS, and annual contract value for maintenance and support"]]
[[/GREPCENT_TABLE]]

Financial Health bookings during 2024 were effectively flat, decreasing by $0.1 million compared to 2023. Viewgol bookings increased by $2.9 million. Net-new bookings excluding Viewgol decreased by $0.2 million, or 1%, and cross-sell bookings decreased by $2.8 million, or 10%, experiencing uncharacteristically high volatility as the pace of prospective sales decisions slowed.

Patient Care bookings during 2024 increased by $2.0 million, or 6%, compared to 2023. This increase was primarily driven by acute care cross-sell bookings, which increased by $4.9 million, or 31%, and new business bookings, which increased by $0.5

54

million, or 5% compared to 2023. This was partially offset by post-acute Patient Care bookings, which decreased by $3.5 million due to the sale of AHT in January of 2024.

Bookings represent our sales activity during the periods reported above. The amount and volume of pending contracts at the end of the period is described under “Business – Backlog.” Some of the contracts in our backlog are subject to modification or cancellation at the convenience of the customer, or for default in the event that we are unable to perform under the contract. There can be no assurance that our bookings or backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable.

Critical Accounting Policies and Estimates

General 

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We are required to make some estimates and judgments that affect the preparation of these financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, but actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to clients in an amount that reflects the consideration we expect to receive in exchange for those products and services. We enter into contracts that can include various combinations of products and services, which are generally distinct and accounted for as separate performance obligations. The Company employs the 5-step revenue recognition model under ASC 606, Revenue from Contracts with Customers, to: (1) identify the contract with the client, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Refer to Note 2 to the consolidated financial statements included herein for further discussion regarding our revenue recognition policies and significant judgments involved in our application of ASC 606. Although we believe that our approach to estimates and judgments regarding revenue recognition is reasonable, actual results could differ and we may be exposed to increases or decreases in revenue that could be material.

Allowance for Credit Losses

Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The collectability of trade receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment patterns, resulting in the establishment of general reserves. Additionally, if it is determined that a customer will be unable to fully meet its financial obligation, such as in the case of a bankruptcy filing or other material event impacting its business, a specific allowance for credit losses may be recorded to reduce the related receivable to the amount expected to be recovered. Refer to Note 11 to the consolidated financial statements included herein for a detailed discussion about our credit loss accounting policy related to trade accounts receivable.

The Company has sold information and patient care systems to certain healthcare providers under short-term payment plans and sales-type leases. The Company establishes an allowance for credit losses for these financing receivables based on the historical level of customer defaults under such financing arrangements. Additionally, if it is determined that a customer will be unable to meet its financial obligation, such as in the case of a bankruptcy filing or other material event impacting its business, a specific allowances may be recorded to reduce the related receivable to the amount expected to be recovered.

Although we believe that that our approach to estimates and judgments regarding our allowance for credit losses is reasonable, actual results could differ and we may be exposed to increases or decreases in required allowances that could be material.

Business Combinations, including Purchased Intangible Assets

The Company accounts for business combinations at fair value. Acquisition costs are expensed as incurred and recorded in general and administrative expenses. Measurement period adjustments relate to adjustments to the fair value of assets acquired and liabilities assumed based on information that we should have known at the time of acquisition. All changes to purchase accounting that do not qualify as measurement period adjustments are included in current period earnings.

55

The fair value amount assigned to an intangible asset is based on an exit price from a market participant’s viewpoint, and utilizes data such as discounted cash flow analysis and replacement cost models. We review acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the identifiable net tangible and intangible assets acquired. Goodwill is not amortized but is evaluated for impairment annually or more frequently if indicators of impairment are present or changes in circumstances suggest that impairment may exist. We test annually for impairment as of October 1.

As part of our annual goodwill impairment test, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we conduct a quantitative goodwill impairment assessment which compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds that reporting unit's fair value. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered to be impaired.

Critical estimates in valuing certain intangible assets and the fair value of the reporting unit during goodwill impairment tests include, but are not limited to, identifying reporting units, historical and projected customer retention rates, anticipated growth in revenue from the acquired customers, and expected future cash outflows.

Significant judgments in testing goodwill for impairment also include assigning assets and liabilities to the reporting unit and determining the fair value of each reporting unit based on management’s best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

Management’s best estimates and assumptions are employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.

Future business and economic conditions, as well as differences actually related to any of the assumptions, could materially affect the financial statements through impairment of goodwill or intangible assets, and acceleration of the amortization period of the purchased intangible assets, which are finite-lived assets.

Software Development Costs

Software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. Under ASC 350-40, software development costs related to preliminary project activities and post-implementation and maintenance activities are expensed as incurred. We capitalize direct costs related to application development activities that are probable to result in additional functionality. Capitalized costs are amortized on a straight-line basis over five years. We test for impairment whenever events or changes in circumstances that could impact recoverability occur.

Estimates

The Company uses estimates to record certain other transactions and liabilities. These estimates are generally based on management’s best judgment, past experience, and utilization of third party services such as actuarial and other expert services. Because these estimates are subjective and variable, actual results could differ significantly from these estimates. Significant estimates included in our financial statements include those for reserves related to uncertain tax positions, bad debt and credit allowances, legal liability exposure or lack thereof, accrued expenses, and (prior to 2023) self-insurance reserves under our health insurance plan.

56

Quantitative and Qualitative Disclosures about Market and Interest Rate Risk

Our exposure to market risk relates primarily to the potential fluctuations in the Secured Overnight Financing Rate ("SOFR") which replaced the British Bankers Association London Interbank Offered Rate ("LIBOR") as the new benchmark interest rate for our credit facilities. We had $172.8 million of outstanding borrowings under our credit facilities with Regions Bank at December 31, 2024. The term loan facility and revolving credit facility bear interest at a rate per annum equal to an applicable margin plus, at our option, either (1) the Adjusted SOFR rate for the relevant interest period, subject to a floor of 0.5%, (2) an alternate base rate determined by reference to the greatest of (a) the prime lending rate of Regions, (b) the federal funds rate for the relevant interest period plus one half of one percent per annum and (c) the one month SOFR rate, subject to the aforementioned floor, plus one percent per annum, or (3) a combination of (1) and (2). Accordingly, we are exposed to fluctuations in interest rates on borrowings under our credit facilities. A one hundred basis point change in interest rate on our borrowings outstanding as of December 31, 2024 would result in a change in interest expense of approximately $1.7 million annually.

We did not have investments as of December 31, 2024. We do not currently utilize derivative financial instruments to manage our interest rate risks.

Recent Accounting Pronouncements

Reference is made to Note 2 to the consolidated financial statements for a discussion of accounting pronouncements that have been recently issued which we have not yet adopted.